Update: April 2014 Vectorial Analysis for May and July Soybeans

A follow up on the soybean market vectorial analysis is presented. The soybean market made final bottom on November 2014. Following a reaction top on December, the market declined and made a secondary bottom on January 2014. Since then the market has rallied with strength.

 A previous update on market geometry warned about the first reaction which took place on March 07th. The uptrend was resumed after a couple of bottoms on March 12th and 24th. Right now market geometry once again indicates the possibility of a reaction. It is important to be prepared in case a correction takes place, tightening stop loss orders once again to lock in some profits.
 

 May soybeans vectorial analysis

 This section is an update of the previous analysis done on March 2014 on market geometry.

 Figure 1 shows a daily price-time chart for May soybeans. It contains several PTVs[1] whose lengths are related to the third Square of Twelve, which has been the rate of vibration of this market since 2012. The theoretical lengths of these vectors are presented below:

• 3x144 = 432
• 3x144/√2 = 305.47
• 3x144/2 = 216
• 3x144/4 = 108

 

Figure 1
Daily prices for May soybean futures from 2012 to 2014. PTVs following the third Square of Twelve and the square root of two ratio.

 From Figure 1 it can be seen that the PTV extending from the final bottom of Nov 05th 2013 to Wednesday April 09th high measures 306.89, which is the third Square of Twelve divided by the square root of two ratio. It is the same length as the PTVs defining the decline from the major top of September 2012 to the bottoms of November 2012 and January 2013. It is as well the same length as the sum of the PTVs defining the market action from August to September 2013 and from September to November 2013. This is,
 

 174.43 + 132.85 = 307.28

 which equals as well the third Square of Twelve divided by the square root of two ratio.

 By comparing the lengths of successive PTVs shown in Figure 1 it is possible to see that, unlike the years 2012-2013 when each PTV was smaller than the previous one, the current period is an expanding process in which each PTV is larger than the previous one.

 These facts indicate that a change in trend is unlikely at this moment, but a correction may be under way.

 July soybeans vectorial analysis

 Each contract vibrates at its particular rate, regardless of the commodity. The current section addresses the vectorial analysis for July soybean futures.

 Figure 2 shows a daily price-time chart for July soybeans. It contains several PTVs whose lengths are related to the first Square of Twelve. Notice that the July option vibrates at a different rate than the May option. The theoretical lengths of these vectors are presented below:

• 1x144 = 144
• 2x144 = 288
• √10 x 144 = 455.37

 

Figure 2
Daily prices for July soybean futures from 2012 to 2014. PTVs following the first Square of Twelve.

 
  From Figure 2 it can be seen that the length of the vector defining the uptrend from the final bottom of November 2013 to the current 2-day swing high of April 09th equals two times the first Square of Twelve, or 289.13. This is the same length as the PTV defining the uptrend from April to July 2013, at the expiring of that option. It is as well, the same length as the sum of the PTVs defining the market action from August to September 2013 and from September to November 2013. This is,

 164.98 + 130.97 = 295.95

 which equals two times the first Square of Twelve.

 Moreover, the last rally from March 12th to April 09th equals the first Square of Twelve. This is the same PTV length defining the last rally from June to July 2013. It is interesting to note the similarities between the vectorial analysis between the May and July options. This analysis also indicates the possibility of a correction.

 Conclusion

 Each soybean option vibrates at its particular rate. Market geometry shows that the PTVs defining the current rally in both May and July soybeans have reached a length related to the third and first Square of Twelve, respectively. For this reason a correction can be anticipated. Analysts and traders could consider tightening their stop loss orders to protect profits in case the market reacts.

 Statistically, after a bottom on November the market is most likely to top in May or June. The months of May, June and July are the seasonal months for extreme high prices. However, even though May is a seasonal month for high prices, the soybean market sometimes bottoms in May and rallies until June or July, reaching extreme high prices in those months.

 There are different cycles due for mid 2014. Figure 1 and Figure 2 contain a couple of such time cycles. A harmonic of Gann's 14 years cycle is due for next week, between the 16th and the 20th of April. Depending on the market action this cycle could align with a market bottom.

 

 The next cycle, due for May 2014, was presented in the 2014 soybean road map as a harmonic of Gann's 20 years cycle. It was mentioned that this cycle should be regarded as important.

[1] PTV stands for Price-Time Vector. This concept was introduced by Bradley Cowan in his writings. Both PTV and Price-Time Vector are trademarks of Bradley Cowan.

Update 2: April 2014 Vectorial Analysis for Cash and July Soybeans  

Ricardo Da Costa

Grain Market Analysis